NASDAQ OMX Group, Inc. (NDAQ): Insiders Aren’t Crazy About It

Is NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) a good investment right now? Investors who are in the know are turning less bullish. The number of bullish hedge fund bets stayed the same which is a slightly negative development in our experience

If you’d ask most stock holders, hedge funds are perceived as slow, outdated financial vehicles of years past. While there are over 8000 funds in operation at the moment, we hone in on the top tier of this club, close to 450 funds. It is widely believed that this group oversees most of the smart money’s total asset base, and by tracking their highest performing stock picks, we have come up with a number of investment strategies that have historically outpaced the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points a year for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 23.3 percentage points in 8 months (see the details here).

Equally as important, bullish insider trading sentiment is another way to break down the stock market universe. Obviously, there are a number of incentives for an insider to sell shares of his or her company, but only one, very simple reason why they would behave bullishly. Many academic studies have demonstrated the useful potential of this method if shareholders understand what to do (learn more here).

With all of this in mind, let’s take a gander at the key action regarding NASDAQ OMX Group, Inc. (NASDAQ:NDAQ).

How are hedge funds trading NASDAQ OMX Group, Inc. (NASDAQ:NDAQ)?

At the end of the first quarter, a total of 21 of the hedge funds we track were long in this stock, a change of 0% from the previous quarter. With the smart money’s capital changing hands, there exists a select group of notable hedge fund managers who were boosting their stakes substantially.

When looking at the hedgies we track, Lakewood Capital Management, managed by Anthony Bozza, holds the largest position in NASDAQ OMX Group, Inc. (NASDAQ:NDAQ). Lakewood Capital Management has a $47.1 million position in the stock, comprising 3.1% of its 13F portfolio. Sitting at the No. 2 spot is Citadel Investment Group, managed by Ken Griffin, which held a $41 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedgies with similar optimism include Daniel Lewis’s Orange Capital, Israel Englander’s Millennium Management and James H. Litinsky’s JHL Capital Group.

Because NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) has witnessed falling interest from the smart money, it’s safe to say that there were a few hedgies that decided to sell off their entire stakes heading into Q2. It’s worth mentioning that Neil Chriss’ Hutchin Hill Capital cut the largest position of the “upper crust” of funds we monitor, totaling an estimated $5.1 million in stock.. Anil Stevens and Glenn Shapiro’s fund, Parameter Capital Management, also dropped its call options., about $2.5 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading NASDAQ OMX Group, Inc. (NASDAQ:NDAQ)?

Insider purchases made by high-level executives is most useful when the company in question has experienced transactions within the past 180 days. Over the latest 180-day time frame, NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) has experienced zero unique insiders buying, and 6 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to NASDAQ OMX Group, Inc. (NASDAQ:NDAQ). These stocks are IntercontinentalExchange Inc (NYSE:ICE), Apollo Global Management LLC (NYSE:APO), NYSE Euronext (NYSE:NYX), CBOE Holdings, Inc (NASDAQ:CBOE), and Ares Capital Corporation (NASDAQ:ARCC). All of these stocks are in the diversified investments industry and their market caps are similar to NDAQ’s market cap.

With the returns exhibited by the aforementioned time-tested strategies, retail investors must always pay attention to hedge fund and insider trading sentiment, and NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) applies perfectly to this mantra.

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